16 September, 2008

How Sound are 'Free' Financial Systems ?

The first set of fears about the U.S. Housing market emerged in March/April 2007. Those fears were ignored. There was a panic in August 2007. Hundreds of Billions of Dollars were "pumped" into the Financial System then (by the US Federal Reserve, the European Central Bank and the Bank of Japan). Did that money get invested in worthwhile assets, building up real portfolios, loans to worthy borrowers, better asset classes ?
Suprisingly, while Stock Markets were still optimistinc, the price of Oil and other commoodities continued to rise at a rapid rate.
This year we've had Bear Stearns collapse. Then "Fannie Mae" and "Freddie Mac" {why can't we know and use their proper names ?} had to be "rescued" from colossal incompetence. Next goes Lehman Brothers. Merrill Lynch is "rescued" by Bank of America.

The DotCom collapse was quickly followed by the scandals of Enron, WorldCom, Tyco and others. Sarbanes Oxley was supposed to improve controls. Like DUH ??!! The very auditors and credit rating agencies couldn't see how bad were the investment "bankers" {have we all forgotten what a "banker" was supposed to mean -- "reliable, true to his word, knowing the value of money and assets" ?} at their jobs ?

How strong is the "Free Markets" system ? How resilient is it ? How could hundreds of billions in portfolios be allowed to disappear in less than a year without anyone really knowing the "Why" of those write-offs ?

In 1997 the US, the World Bank and the IMF were critical of Asia. This year it has been Asia that has been called upon to "rescue" those masters of money management and fiscal responsibility.

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